Have your agent meet the appraiser with comps in hand. The appraisers appreciate the effort and most understand what is happening in the market and adjust their appraisals accordingly.
You may not have as much of a deficit, or any, as you think. The most important thing is that your agent is looking out for you, it isn't about them...it's all about you. Make sure you still have plenty of money in the bank at the end of the transaction and that you can really afford the payments.
Also..... Make sure your agent shows you comps so you can be sure you are not overpaying unnecessarily in the first place
I am completely at an understanding of where the market is at, where it has come from and mostly where it is going. I am not in a hurry to make a mistake but having to wait the past 6 months to get into a position to finally be able to be buyer has been most costly to myself in more ways than one.
I appreciate a clear perspective of my situation that has been provided here by all. Agreeing on what is reality and agreeing on what is ethical are not always one in the same.
I will make one last note as a buyer, "Write the Deal"! I have had two Realtors who refused to "Write the Deal" as it was asked on two separate properties where each sold for UNDER my offer, that's with approved funding and 15 day closing in hand (not to mention $200K cash). I am on my 3rd Realtor and I must say I am not very impressed with what I have seen thus far. Where have the Terry Mungeon's of the world gone?
This entire system has been fueled by excessive buyer demand - there is nothing illegal about it. A listing agent KNOWS they're in the catbird position, and are merely doing their best to get their sellers not only the highest offer, but also the one most likely to close escrow - meaning putting in clauses such as the one you described.
If YOU don't agree to it, most likely someone else will.
Actually, though, I'm surprised to hear that such competition is going on - in my experience things were much more competitive a few months ago.
In the past two months the number of available listings has doubled, and the number of buyers has been substantially reduced. ( As cash investors have fled the market, due to prices now being 20-25% higher than they were in January.)
What I am now seeing is homes on the market longer, and prices coming down, for the majority of listings - except for only the most desirable properties - which may be the type of property you're offering on.
But, if there's sufficient downpayment, then frequently the buyer is not required to bring in any additional money. The lender will simply adjust the debt-to-income ratio, and if it still remains within guidelines, a low appraisal will fly just fine. Most lenders will use the lower of the appraised value or the purchase price, and if the buyer can still avoid PMI, (ie: the adjustment still gives the buyer 20% equity), and stay within guidelines, then it can work. Honestly, I think the intent of the counter may have been misperceived.
Personally, I wouldn't sign a contract with that clause, because if the appraised value comes in at 10K lower (for instance) than the agreed-upon purchase price, and it does not put the brakes on the loan, and the seller is still getting the purchase price they want, then to insist that the difference goes to the seller is a pretty strong-arm request in my mind, even in this market. But again, I think the intent of that clauser may have been miscommunicated, and a talk betweeen agents will confirm that, and perhaps the wording can be revised.
Let me know if you need a purchase loan for the property or want to get pre-approved (this will increase the chances of your loan being accepted) because I can certainly help you out there. You can call me at 408-352-5147 or email me at AGreer@themortgageoutlet.com. You can check us out at http://www.TheMortgageOutlet.com. I will look at your situation and present you with some options.
However, during the run-up, it was somewhat common for sellers/listing agents to protect against the "appraisal lag" when the appraisals didn't keep up with the rise in prices.
When I represent a buyer, I provide a Market Evaluation, just as I would for a seller marketing his home. Their asking price and your offering price can't realistically be evaluated without knowing the market value of the home.
You may want to find another home, or at least negotiate an acceptable minimum for the appraisal to protect yourself. This would depend on whether you would be comfortable increasing your downpayment at all to make up for a low appraisal.
There is nothing "heaven-sent" about the appraisal... just one person's opinion. However, it does control the loan/downpayment, so you need to prudently protect yourself.
Their offer of the home is NOT an "actionable half-of-an-offer" that you can force them to accept because the put the home on the market at that price.
Another help that my buyers have is my Buyer Cash-Back, which amounts to several thousand dollars they don't have to come up with.
So, in conclusion, you should at the very least set up a minimum acceptable appraisal value, so you don't get blind-sided by an appraisal that makes it difficult or impossible for you to complete the purchase.
Hope this helps,
It has been like the wild west this year. Hopefully, however, you are working with a wise Realtor?
I would never advise a buy to sign that they pay the difference between list and appraised value. That just seems wrong to me. Why would you want to pay more for something than it's worth?
If you agent is advising you to sign it...get a new agent. Not all Realtors are sleazy. Don't buy into the game.
Inventory levels have improved somewhat and there are fewer buyers on the market now...find something where you don't have to play that game there are fair deals and fair agents out there!! I promise!!
Cindy Davis, Broker
SD Home Source Realty
Phone: (619) 379-8616
CA DRE #01363537
Many of us in the Orange County market are seeing a stabilization in pricing occurring right now, prices still going up but not like the last 6-9 months.
I hope you get the home you want at a price you are comfortable with.
I was out at some open houses today in Rancho Santa Margarita and did note that ether is a bit more inventory in certain areas, and therefore a bit more competition.
Although everyone in this forum has been correct with respect to the OC market as a whole, it does not preclude your ability to request some seller concessions towards closing costs, perhaps $5k. That would diminish your exposure.
Prudence does pay dividends so I'd strongly suggest you get a formal DE (underwriting approval) before the offer is finalized. This will enable you to meet the contingency date with a full understanding of the situation and therefore make in informed decision thereafter.
As a National Direct Lender headquartered out of Orange County, I'd be happy to facilitate this requirement for you right away, within 24 hours. Better safe than sorry, right?
It sounds like you are ready to purchase and have the money to play the "over asking" game that is today's market but.....do it with an ethical agent that warns you about situations like this.
Please keep me posted on what you decide to do.!
Cindi Powalski, BS, CHS, SFR, SS, CNE
Lake Forest, RSM, MV
Background - For at least 6 - 9 months sellers in the most desirable areas of OC have been successful at "removing the appraisal contingency" of the purchase contract. Meaning more buyers than sellers (nothing unethical about that). Also, appraisals are for banks risk assessment. Not necessarily linked to what a ready, willing, an able buyer thinks a house is worth. Appraisers are coming off a low ( or lower) market of 2011-2012 too. Have sellers "overshot" the market ? yes.
Is this industry built on greed? yes. The real question is? how strong is your paper. Make no mistake , the market is tight.
I am pretty certain that if yor Agent is a good one, you are going to end up in the right place at the right price, maybe not today, maybe not tomorrow, but eventually! Hang In There!
Al Burnham OLYMPIC REALTY 949-422-7374